Amazon Prime growth and rising profit at the online retailer’s cloud-computing unit helped fuel a 20 percent sales jump and an unexpected quarterly profit.
When Amazon.com’s retail website debuted 20 years ago, few other than Jeff Bezos would have expected the company to challenge behemoth Wal-Mart Stores.
When the stock market opens Friday, Amazon’s value will likely surpass its retail rival.
Buoyed by surprisingly strong earnings, Amazon shares soared more than 17 percent in aftermarket trading Thursday to $565.50. That would put Amazon’s market value, measured during regular trading hours, at $263.3 billion. Wal-Mart’s market capitalization at the market close Thursday was $235.6 billion.
With the after-hours trading gains, Amazon shares have nearly doubled in the past nine months. And no shareholder has benefited more than the company founder and chief executive, Jeff Bezos.
His Amazon stock is now worth $47.4 billion, putting his total net worth north of $50 billion, according to Forbes, which now ranks him as the world’s fifth-wealthiest person.
Amazon’s stock gains came after it reported unexpectedly strong second-quarter results. The consensus revenue forecast from analysts was $22.4 billion, according to figures compiled by Bloomberg. But Amazon beat that with $23.18 billion in sales.
Maybe more startling, Amazon reported a profit when much of Wall Street was expecting a loss. The company earned $92 million, or 19 cents a share, while the consensus analyst projections called for a 14-cent-a-share loss.
A year ago, Amazon lost $126 million, or 27 cents a share, on sales of $19.34 billion.
Perhaps the biggest driver of those surprising numbers was Amazon Prime, the $99-a-year service that includes expedited shipping at no extra cost. Amazon has rapidly added features to Prime to lure more members, who usually shop more frequently and buy more items than non-Prime members.
“The growth has been fueled by Prime growth and selection growth,” Amazon Chief Financial Officer Brian Olsavsky said in a conference call with journalists.
Just look at North American sales of the company’s electronics and other general merchandise, a category that includes computers, toys, jewelry and other items. For the quarter, that segment grew 31 percent to nearly $11 billion.
The company continues to look for new ways to add Prime members, holding, for example, a Prime Day sale earlier this month to coincide with the 20th anniversary of the Amazon website’s debut. Only Prime subscribers could take advantage of the discounts, which led to a surge in membership.
“It surpassed all of our expectations,” Olsavsky said in a separate conference call with financial analysts. “It was Christmas in July, quite frankly.”
Not surprisingly, the company intends to hold more Prime Day sales, Olsavsky said. He declined to disclose the number of Prime members overall, though analysts believe it could now top 50 million. And Olsavsky noted that Prime is growing faster in international markets than it is in the United States.
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Amazon also posted particularly strong results from its cloud-computing unit, Amazon Web Services.
The company began disclosing detailed results from the unit only last quarter, as it became a “material” piece of its overall business by accounting standards. Second-quarter AWS sales climbed 81 percent to $1.8 billion, while operating income quintupled to $391 million.
If AWS is able to maintain that level of operating earnings — hardly a given in an intensely competitive market that includes giants such as Microsoft and Google — it could help make Amazon more consistently profitable. That prospect, something Wall Street has long clamored for, no doubt helped lift Amazon’s shares.
“My guess is that Amazon itself may be pleasantly surprised by the combination of strong growth and margins from AWS,” Robert W. Baird & Co. analyst Colin Sebastian said in an email interview.
While foreign-exchange rates dampened international results, the company called out its performance in India, which it describes as its “fastest growing geography.” Amazon launched its retail business there two years ago, and Bezos visited the country last year, committing $2 billion to fund Amazon’s expansion there.
“When we see a positive surprise, we double down on it,” Olsavsky said. “India is that kind of surprise.”
As usual, the company offered little insight on upcoming products. During the analyst call, Baird’s Sebastian asked if Amazon would revive the ill-fated Fire Phone, which flopped shortly after its debut a year ago. Olsavsky declined to say if the Fire Phone was dead, noting only that he had “nothing to share.”
For the third quarter, which ends in September, Amazon forecast net sales of $23.3 billion to $25.5 billion, representing growth of 13 to 24 percent over the same period in 2014.
As for the bottom line, the company expects to post results between a $70 million operating profit and a $480 million operating loss. That compares with a $544 million operating loss in the third quarter of 2014.
Amazon also said it now has 183,100 employees, a 38 percent jump in the past year. Olsavsky said “the vast majority” of new hires came in operations, primarily at its warehouses and call centers.
And, for the first time, Amazon disclosed its Washington state head count, saying that more than 24,000 of those employees work at its headquarters, warehouses and customer-service operations in the state. The number was first reported by the Puget Sound Business Journal.